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SABMiller plc Annual Report 2007

Corporate governance

Board of directors: composition and independence

3. Board of directors: composition and independence

The board currently consists of the Chairman (Mr Kahn); eight independent non-executive directors (including Lord Fellowes, the Senior Independent Director); five non-executive directors who are not considered to be independent; and two executive directors (Mr Mackay, the Chief Executive, and Mr Wyman, the Chief Financial Officer). Biographical information concerning each of the directors is set out in the Board of directors.

The size and certain aspects of the composition of the board and of the audit, nomination and corporate accountability and risk assurance committees are determined primarily by the terms of our relationship agreement with Altria, which was originally approved by shareholders in 2002 as part of the Miller transaction, and was amended, with shareholders’ approval, in 2005 as part of the Bavaria transaction, and by the terms of our relationship agreement with BevCo (a holding company of the Santo Domingo Group), which was approved by shareholders in 2005 as part of the Bavaria transaction.

The agreement with Altria limits the size of the board to a maximum of 15 directors, of whom no more than two are to be executive directors, up to three are to be non-executive directors nominated by Altria, up to two are to be non-executive directors nominated by BevCo, and up to eight are to be non-executive directors appointed by the board. The agreement with BevCo allows BevCo to nominate up to two non-executive directors for appointment to the board.

The board is grateful to Altria for its indulgence in permitting for the time being the maximum number of directors allowed under the relationship agreement to be exceeded, in order to assist the company to meet the requirements of the Combined Code.

Altria and BevCo have each exercised their right under their respective agreements to nominate one director for appointment to the nomination committee. BevCo has the right to nominate one director for appointment to the corporate accountability and risk assurance committee (CARAC) (although it has not exercised this right), and Altria has the right to nominate one director for appointment to the audit committee (which it has exercised).

Ms De Lisi, who was nominated for appointment to the board and the audit committee by Altria, stepped down from the board on 30 April 2007, following her retirement from Altria. Altria nominated Mr Dinyar Devitre to replace Ms De Lisi. Mr Devitre was, until 31 March 2008, Senior Vice President and Chief Financial Officer of Altria and is currently a member of the board of Altria. He joined the board of SABMiller as a non-executive director with effect from 16 May 2007.

The board considers eight directors – Ms Doherty, Lord Fellowes, Mr Manser, Mr Manzoni, Mr Morland, Mr Pieterse, Ms Ramos and Mr Ramaphosa – to be independent for the purposes of the Combined Code. The board considers six non-executive directors (including the Chairman) not to be independent for the purposes of the Combined Code: Mr Bible and Mr Devitre, as they are nominees of Altria, the company’s largest shareholder; Mr Santo Domingo Dávila and Mr Pérez Dávila, as they are nominees of the Santo Domingo Group, the company’s second largest shareholder; Lord Renwick of Clifton, because of his position with JPMorgan Cazenove; and the Chairman, Mr Kahn, who is a former chief executive of the company and has served continuously on the board, or on the board of the company’s predecessor, since 1981 (although he has been a director of the company only since 1999) and, as Chairman, is deemed not to be independent under the Combined Code.

For ease of reference, directors’ independence status for Combined Code purposes is indicated in the table below.

The board continues to believe that its overall composition remains appropriate, having regard in particular to the independence of character and integrity of all of its directors, and the experience and skills which they bring to their duties. The board is confident that the appointment of both Ms Ramos and Mr Pieterse, two distinguished and internationally acclaimed individuals, will make a significant contribution to its deliberations.

It is now nine years since the company listed on the London Stock Exchange. SABMiller has been fortunate to retain the services of several distinguished non-executive directors, the Chairman, Lord Fellowes, Mr Morland, Mr Ramaphosa and Lord Renwick, for the entire nine-year period. They have provided considerable stability to the board since the listing in 1999 and the board has benefited greatly from the presence of individuals who have over time gained valuable insight into the group, its markets and the industry. The provisions of the Combined Code require the board to consider, where a director has served for a period of more than nine years, whether that director continues to be independent. The board has conducted a rigorous review of the performance of the Chairman, Lord Fellowes, Mr Morland and Mr Ramaphosa and considers that each of these directors brings invaluable integrity, wisdom and experience to the board and that they continue to contribute to the direct, robust and constructive debate held within the board and committee deliberations. Therefore, the board is entirely satisfied as to the continued independence of each of these directors. Under the Combined Code, directors who have served for more than nine years are required to stand for annual re-election and the board has determined that they should do so. The board does not consider it to be in the interests of the company or shareholders to require all four of the directors who have served for nine years to retire at the same time (as noted, Lord Renwick will be retiring in July 2008) and strongly favours ensuring continuity and stability through orderly succession.

While recognising the benefits of the experience and stability brought by its long-standing directors, the board remains committed to the progressive renewal of board membership and has therefore acted to bring about the appointment of Ms Ramos and Mr Pieterse. The board will continue to act in the best interests of the company and shareholders as it considers further appointments and the future tenure of the directors who have served for more than nine years.

The board considers that the composition of the audit committee remains appropriate, given Altria’s interest as the company’s largest shareholder, and is satisfied that, having regard to the terms of the relationship agreement between the company and Altria, and to the experience and background in financial matters of Mr Devitre, the independence and effectiveness of the audit committee in discharging its functions in terms of the Combined Code continue to be considerably enhanced and not compromised.

Directors’ attendance (1 April 2007 to 31 March 2008) and committee memberships

    Board Audit Remuneration Nomination CARAC AGM 
  Independent* Attended Possible Attended Possible Attended Possible Attended Possible Attended Possible  
J M Kahn 5 8 8         3 3 2 2 3
E A G Mackay 5 8 8             2 2 3
M I Wyman 5 7 8             1 2 3
G C Bible 5 7 8         1 1     3
D Devitre 5 7 7 3 3             3
M E Doherty 3 5 8 3 4             3
Lord Fellowes 3 8 8 4 4 5 5 3 3 2 2 3
P J Manser 3 7 8 4 4 4 5 3 3 2 2 3
J A Manzoni 3 7 8     5 5     2 2 3
M Q Morland 3 8 8 4 4 5 5 3 3     3
C A Pérez Dávila 5 8 8                 3
M C Ramaphosa 3 6 8         0 1 1 2 5
Lord Renwick 5 7 8         3 3     3
A Santo Domingo Dávila 5 8 8         1 1     3

* considered to be independent for Combined Code purposes

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